Dick Smith can survive, says founder

Entrepreneur Dick Smith explains why he doesn't own shares in the company that bears his name.

The acquisition includes the Dick Smith brand and trademarks, the online business in Australia and New Zealand, customer and loyalty databases, websites and domain names.

While Dick Smith's online business accounted for only 8 per cent of total sales, the website, customer database and intellectual property were keenly sought, leading to "aggressive" bidding, according to one source.

Mr Kogan, a BRW Rich Lister who started selling televisions online from the garage of his parents' house in 2006, will take control of the online store from Ferrier Hodgson in June and plans to operate the site as a separate online channel to Kogan.com.

"Dick Smith is one of the most iconic Australian retail brands and we will be able to leverage the millions of dollars we've invested into online retail systems and architecture over the last decade to sustainably run the business," Mr Kogan told Fairfax Media.

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Mr Kogan acknowledged the damage to the Dick Smith brand since the retailer's collapse in January and said he would invest to rebuild consumer trust and make Dick Smith's online offer "better than ever."

"Ultimately, a brand grows when it delivers on its promises. We will work tirelessly to exceed the expectations of every Dick Smith customer with a beautiful shopping experience," he said.

Mr Kogan said DickSmith.com.au would continue to sell branded and private label consumer electronics and appliances, but prices could be cheaper as Dick Smith and Kogan pooled resources to secure more favourable trading terms with suppliers.

Mr Kogan also said suppliers who previously refused to supply Kogan to avoid a backlash from traditional retailers, such as Harvey Norman and JB Hi-Fi, may be more willing to supply DickSmith.com.au.

Kogan prepares for IPO

The deal will deliver a significant boost in sales and customer numbers as Mr Kogan, 32, prepares to take his company public through a $300 million initial public offer.

While Ferrier Hodgson is closing all of Dick Smith's bricks and mortar stores and liquidating about $200 million of stock, it has maintained the online business, buying in new stock to replenish supplies.

As a result, Dick Smith's online sales have been tracking at an annual run rate around $95 million, despite the negative publicity surrounding the company's collapse. In comparison, Kogan.com is understood to be generating annual sales of close to $250 million.

Kogan will be able to tap the one million existing members in Dick Smith's customer loyalty database to boost sales for both DickSmith.com and Kogan.com.

After hiring KPMG to explore strategic options two years ago, Mr Kogan is reported to be working with investment banks UBS and Canaccord Genuity to ready the company for an initial public offering in the second half of this year.

A Belarussian migrant, Mr Kogan founded kogan.com almost 10 years ago, selling cheap consumer electronics such as private label televisions sourced directly from Chinese factories and branded smartphones and tablets sourced from grey markets or through parallel imports.

In recent years Kogan has morphed into an online department store, adding new categories such as clothing and footwear, health and beauty products, childrens wear, sporting goods, outdoor equipment and homewares.

While retail experts believe omni-channel retail models (with bricks and mortar, web and mobile stores) are superior to pure-play online retail models, Mr Kogan does not currently have plans for physical stores.

"Omni-channel is a nice buzzword, but we believe there are strong digital efficiencies in our model that we intend to leverage in order to provide Australians with the best value," he said.

"At this stage, we're focussing on making our business more efficient, not less efficient, and passing on the savings to consumers."